If you’re living with a disability, planning for your financial future can feel overwhelming.
The Registered Disability Savings Plan (RDSP) is a powerful tool designed specifically to help you save for long-term financial security, with significant support from the Canadian government.
Here’s how it works and why it might be right for you.
What is an RDSP?
An RDSP is a savings plan created to help people with disabilities save for the future.
It’s not just about putting money aside—it’s about growing your savings with tax-free investment income and government contributions that can multiply what you save.
An RDSP is available to individuals who meet specific criteria:
For example, Sarah, a 30-year-old living with a disability, is eligible and can use an RDSP to save for future care and living expenses.
The plan can be opened by the beneficiary themselves if they are mentally capable, or by a legal guardian, parent, or qualifying family member if they are not.
How do RDSP grants work?
Contributions to the plan are not tax-deductible, but the investments grow tax-free. Moreover, the government boosts savings through the Canada Disability Savings Grant (CDSG), which matches contributions by up to 300%. Also, the Canada Disability Savings Bond (CDSB) provides up to $1,000 annually for low-income families, even without contributions.
For instance, if Sarah contributes $1,000 to her RDSP, she could receive a maximum of $3,500 in grants and bonds for the year and $70,000 in her lifetime.
How can I withdraw from my RDSP?
Withdrawing from an RDSP can provide much-needed funds, but it’s essential to understand the repayment rules tied to government contributions.
The 10-year repayment rule requires all grants and bonds contributed in the last 10 years to be repaid if any of the following conditions are met:
For regular withdrawals, the proportional repayment rule applies, requiring $3 of grants and bonds to be repaid for every $1 withdrawn, up to the assistance holdback amount.
For example, Sarah received $20,000 in government grants and bonds over the last 10 years and decided to withdraw $1,000 to cover medical expenses.
Under the proportional repayment rule, she would need to repay $3,000 (three times the withdrawal amount) to the government, reducing her assistance holdback amount to $17,000 while allowing her RDSP to continue growing.
If Sarah’s condition worsens and her life expectancy is less than five years, she could withdraw up to $10,000 annually without triggering the 10-year repayment rule, provided her plan is designated as a Specified Disability Savings Plan (SDSP).
These rules ensure RDSP funds are preserved for long-term needs while offering flexibility for emergencies, making it vital to plan withdrawals carefully and consult with your RDSP issuer for guidance.
